Financial Inclusion Under the Pradhan Mantri Mudra Yojana

Abstract

This study evaluates the impact of the Pradhan Mantri Mudra Yojana (PMMY), launched in 2015, as a key financial inclusion initiative aimed at providing collateral-free loans to micro and small enterprises (MSEs) in India. Using secondary data from PMMY annual reports, RBI, SIDBI, and MSME Ministry sources, the paper analyses trends in credit disbursement, borrower demographics, and regional patterns across the Shishu, Kishore, and Tarun loan categories. The findings indicate that while over ₹18.39 lakh crore has been sanctioned to 34.93 crore borrowers, a disproportionate share remains within the Shishu category, raising concerns about scalability and long-term sustainability. The study conducts regression analysis to examine disparities in loan allocation based on gender, caste, and entrepreneurial experience. Results show that female borrowers receive on average ₹13,400 less than male counterparts, and Scheduled Caste borrowers receive significantly lower loans (₹2.84 lakh less), indicating persistent systemic biases. First-time entrepreneurs also face notable disadvantages, with lower average loan amounts and limited access to higher-value credit. While PMMY has enhanced financial access, particularly for women and marginalized groups, the benefits remain uneven in terms of loan size and business advancement. The paper highlights regional disparities, declining participation of new entrepreneurs, and challenges related to financial literacy, documentation, and bank risk aversion. It concludes with policy recommendations to strengthen post-loan support, digital access, and targeted interventions for underserved populations. Overall, PMMY represents a promising step toward inclusive finance, but structural and institutional reforms are essential to maximize its transformative potential.